Labour Market - Wage Determination In Competitive and Non-Competitive Markets

Question 1

Characteristics of a perfectly competitive labour market

Answer 1

-Many buyers and sellers of labour
-Homogenous labour (similar skills)
-Perfect information
-No barriers to entry and exit
-No trade unions
-Perfect mobility of labour

Question 2

Go on sketchpad to show the wage equilibrium in a perfectly competitive labour market

Answer 2

Did you remember:
1.Wage rate on Y axis, quantity of labour on X axis
2.Two lines, Labour supply and Labour demand
3.Equilibrium where LD equals LS

Question 3

What is a monopsony within a labour market

Answer 3

When there is only one buyer of labour within a market

Question 4

Go on sketchpad and draw the wage determination in a monoposony labour market

Answer 4

Did you remember:
1.Downward sloping curve labelled
LD=MRPL

2.AC=LS curve starts from bottom left corner of graph

3. MC starts from the same point as LS=AC but increases faster than AC
4. Output where MC=MRPL
5. A vertical straight coming down from MC=MRPL down to the AC curve
6. A horizontal line from the AC curve to wage rate

OPTIONAL
-Show wage at which a perfectly competitive labour market would offer where
MRPL=AC

Question 5

What is a monopoly within a labour market

GIVE THE MAIN EXAMPLE OF A MONOPOLY IN THE LABOUR MARKET

Answer 5

When there is only one seller of labour in the labour market

TRADE UNION

Question 6

What are 2 ways trade unions could increase wages
(one of the answers have an application point)

Answer 6

1. Set barriers to entry for labour, decreasing LS
   Teachers’ unions in the UK lobbied for a rule requiring all teachers to have degree

2.Set a minimum wage

Question 7

Go on sketchpad to show how are wages determined in a monopoly labour market

Answer 7

Did you remember:
1.Simple LS and LD curve
2.Show original equilibrium wage and quantity
3.Set minimum wage above the equilibrium
4. Label the QD and QS with new wage
5.The new minimum wage curve kinks when it hits the original siupply curve
6. The new supply curve joins the original supply curve

Question 8

Go on sketchpad to show how are wages determined in a bilateral labour market

Answer 8

NGL, GO ON PMT, YOU WERE TOO LAZY TO WRITE THE ANSWER